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Unbooked taxi fare review 2020 Final decision 2 September 2020
An appropriate citation for this paper is: Essential Services Commission 2020, Unbooked taxi fare review 2020 – Final decision, 2 September Copyright notice © Essential Services Commission, 2020 This work, Unbooked taxi fare review 2020 – Final decision, is licensed under a Creative Commons Attribution 4.0 licence [creativecommons.org/licenses/by/4.0]. You are free to re-use the work under that licence, on the condition that you credit the Essential Services Commission as author, indicate if changes were made and comply with the other licence terms. The licence does not apply to any brand logo, images or photographs within the publication. Essential Services Commission Unbooked taxi fare review 2020 – Final decision i
Contents
1. Our decision is to keep maximum fares unchanged 4
We set maximum fares for unbooked taxis 4
Why maximum fares should remain unchanged 5
We have considered stakeholders’ views on the approach to assessing fares 7
We decided to keep ‘time and distance’ tariffs optional 8
This decision takes effect in October 8
2. Consideration of industry developments 9
No shortage in the supply of unbooked taxis 9
Coronavirus pandemic and the industry’s financial viability 10
Service levels appear to have improved 11
‘Time and distance’ tariffs to remain optional 14
3. Costs of providing taxi services 15
Overall, the taxi cost index showed costs have decreased slightly 15
We used the taxi cost index to approximate the change in unbooked taxi costs 16
While driver labour is a cost input, we do not set driver earnings 16
Costs associated with regulatory changes are unlikely to be material 17
4. Stakeholders’ feedback on our draft decision 20
Some stakeholders supported keeping maximum fares unchanged 20
‘Maximum fares should increase’ 20
‘Commission treats the taxi industry differently’ 22
Matters raised during the public forum 23
Appendix A: Maximum fares 25
Appendix B: Our role is to set the maximum fares for unbooked taxi services 29
Our objectives 29
We regulate maximum fares for unbooked taxi services 31
Locations where we set maximum fares for unbooked taxi services 32
Appendix C: How we assessed fares 33
Approach to fare review 33
Our assessment approach helps us meet our legislative requirements and objectives 35
Appendix D: Estimate of cost changes based on the taxi cost index 39
Appendix E: Stakeholders who made a submission 42
Appendix F: Different approaches to assessing maximum fares 43
Market outcomes approach 43
Current taxi cost index 44
Reviewing the cost basket 44
Keeping fares unchanged 45
Varying fares by CPI 45
Contents
ii
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionAppendix G: Industry context 47
The commercial passenger vehicle industry 47
Recent reforms affecting unbooked taxis 49
Competition in the commercial passenger vehicle industry 50
Appendix H: The legislation governing our role in regulating maximum fares 52
Glossary 62
Contents
iii
Essential Services Commission Unbooked taxi fare review 2020 – Final decision1. Our decision is to keep maximum fares unchanged
Maximum fares for unbooked taxi services will remain unchanged from existing levels.
Time and distance tariffs to remain optional.
This decision will come into effect on 1 October 2020.
Our final decision is to keep maximum fares for unbooked taxi services unchanged. We consider
this approach best meets our legislative objectives and requirements.
Given the current and uncertain future impact of the coronavirus pandemic on the commercial
passenger vehicle industry, keeping maximum fares unchanged will provide some level of stability
for consumers and unbooked taxi service providers.
Our decision will not require unbooked taxi service providers to update meters and stickers during
these challenging times.
The release of this final decision, together with our price determination, is the last step in our
review process. The new price determination will come into effect on 1 October 2020.
We set maximum fares for unbooked taxis
As Victoria’s economic regulator, one of our roles is to set maximum fares for unbooked
commercial passenger vehicle services that begin in the Melbourne Metropolitan or Urban and
Large Regional zones (applicable unbooked services), supplied by or within the commercial
passenger vehicle industry.1
Unbooked commercial passenger vehicle services are those provided other than as a result of the
provision of a booking service. They include trips hailed from the street or hired from recognised
taxi ranks, or trips that have not been booked via an ‘app’, over the phone or via a website.
Fares for booked commercial passenger vehicle services are not regulated.
In this paper, we refer to commercial passenger vehicles that provide unbooked services as
unbooked taxis, and applicable unbooked services as unbooked taxi services. This is on the basis
that taxis currently meet the requirements to provide unbooked commercial passenger vehicle
services. However, we acknowledge that other commercial passenger vehicles that meet the
regulatory requirements in the future may also provide applicable unbooked services.
1 Essential Services Commission Act 2001, s. 32; Commercial Passenger Vehicle Industry Act 2017, s. 110D.
1. Our decision is to keep maximum fares unchanged
4
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionWhen we regulate the maximum fares for unbooked taxi services, our objectives are to promote
the long term interests of Victorian consumers and the efficient provision and use of unbooked taxi
services.2 We must also have regard to a range of matters under the Essential Services
Commission Act 2001 and the transport system objectives and decision making principles under
the Transport Integration Act 2010.3
We must complete a review of the maximum fares for unbooked taxi services no later than two
years after a price determination is made.4 The fares we set are maximums, so unbooked taxi
service providers can charge below the maximum fares we set.
Why maximum fares should remain unchanged
In reviewing maximum fares, we considered submissions and feedback from stakeholders and the
matters we must have regard to under legislation. We took into account:
• ongoing changes in consumer demand for and the supply of unbooked taxis
• service quality levels
• changes in the cost of providing unbooked taxi services
• the impact of the coronavirus pandemic on the commercial passenger vehicle industry.
We also considered several factors in deciding whether any proposed changes to the maximum
fares are warranted, including but not limited to that maximum fares should:
• provide some level of stability during the coronavirus pandemic and over the next two years
• not impose unnecessary administrative and implementation burdens on unbooked taxi service
providers during these difficult times.
We discuss these factors in more detail in Appendix C.
After balancing the above considerations and those in Appendix C, we determined that maximum
fares for unbooked taxi services should remain unchanged.
There is no shortage in the supply of unbooked taxis
Given the coronavirus pandemic, we did not collect trip data from commercial passenger vehicle
industry participants to avoid imposing further regulatory burdens on them.
However, information from stakeholders and publicly available data have shown that the number of
registered unbooked taxis has almost doubled since 2017. This suggests there are more than
2 Essential Services Commission Act 2001, s. 8; Commercial Passenger Vehicle Industry Act 2017, s. 110C.
3 Essential Services Commission Act 2001, ss. 8A, 33; Transport Integration Act 2010, s. 24.
4 Commercial Passenger Vehicle Industry Act 2017, s. 110F(2).
1. Our decision is to keep maximum fares unchanged
5
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionenough vehicles to meet customer demand. Generally, in a market where there is excess supply,
there is no pressure for prices to increase.
Quality of taxi services has generally improved
The most recent information available on service levels suggests that the quality of taxi services in
the metropolitan zone has generally improved. This may imply that the current maximum fares
provide sufficient incentives to improve or maintain the quality of service provided.
Costs could have decreased
We estimate that vehicle operating costs for taxis have fallen by 2.7 per cent over the June 2018 to
June 2020 period, while the total cost (including an allowance for potential driver earnings) has
decreased by 0.4 per cent, based on the taxi cost index we developed in 2013.5
Noting stakeholders’ concern regarding the taxi cost index not being reflective of current costs, we
used it only as an approximate indication of how the cost of providing taxi services have changed.6
It is only one of a number of considerations we have balanced in reaching our decision to keep
maximum fares unchanged.
Consideration of the impact of the coronavirus pandemic
Due to the coronavirus pandemic, we have been mindful not to impose unnecessary administrative
and implementation burdens on unbooked taxi service providers. This is reflected in our approach
to reviewing the maximum fares and our final decision. We did not collect large amounts of data
from industry participants and our decision will not require unbooked taxi service providers to
update meters and stickers.
Under stage 4 restrictions put in place by the Victorian Government in August 2020, commercial
passenger vehicles including taxis can operate but only to provide limited services.7 We
understand these business restrictions had a significant impact on the demand for unbooked taxi
services.
We also acknowledge that some form of restrictions in response to the pandemic may extend into
the next regulatory period (that is, from 1 October 2020 to 30 September 2022) and potentially
affect the viability of providing unbooked taxi services.
5We note that the taxi cost index may overstate vehicle operating costs due to changes in the cost structure of operating
a taxi since we developed the index in 2013 (for example, the shift from LPG to hybrid powered vehicles).
613cabs, submission to consultation paper, 29 May 2020, p.3; Ola Australia, submission to consultation paper, 7 May
2020, p.5; ESC meetings with various stakeholders, April-May 2020.
7Commercial Passenger Vehicles Victoria, Driver FAQs, accessed 18 August 2020,
https://cpv.vic.gov.au/drivers/coronavirus-covid-19/coronavirus-covid-19-faqs2/driver-faqs.
1. Our decision is to keep maximum fares unchanged
6
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionTo the extent that unbooked taxi providers are presently experiencing difficult business and
operating conditions it is not because of the level of maximum fares. Even significant increases in
fares would not offset revenue losses associated with greatly reduced demand due to the
pandemic.
Leaving maximum fares unchanged is considered the most appropriate approach given the current
and ongoing uncertainty. Increasing maximum fares is not the solution to improving financial
viability at this time and it would not be in the long term interests of consumers and unbooked taxi
providers.
Government funding boost will provide some financial relief
The Victorian Government announced a $22 million funding boost in July 2020 to provide some
financial relief for drivers and operators, boost the commercial passenger vehicle industry and
support vulnerable consumers who rely on the service.
This funding assistance is for a limited time and is aimed at helping the industry now. It does not
affect our decision on the maximum fares that would apply during the next regulatory period
starting 1 October 2020.
In reaching our final decision, we have balanced the different considerations discussed above and
the feedback received from stakeholders on our draft decision. We consider that this approach
best meets our legislative objectives and requirements.
We have considered stakeholders’ views on the approach to assessing
fares
We agree with stakeholders that a detailed market outcomes approach and a review of the cost
basket would impose an unnecessary administrative burden on unbooked taxi and booking service
providers during the coronavirus pandemic, which is having a significant effect on the industry.8
Instead, we have used a simplified market outcomes approach using qualitative data on demand
for taxis from stakeholder submissions on our consultation paper. We used Commercial Passenger
Vehicles Victoria’s industry data on the number of registered unbooked taxi service providers for
an indication of taxi supply levels.
813cabs, submission to consultation paper, 29 May 2020, p.3; Victorian Taxi Association, submission to consultation
paper, 8 May 2020, p.1; Ola Australia, submission to consultation paper, 7 May 2020, p.5.
1. Our decision is to keep maximum fares unchanged
7
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionSome stakeholders suggested adjusting maximum fares in line with the consumer price index
(CPI). 9 Our main consideration for not adopting a CPI adjustment is because it is not as reflective
of the cost of providing taxi services as the taxi cost index.
In coming to our decision, we have balanced the possible decrease in costs suggested by the taxi
cost index with the other considerations discussed above. We consider that this approach and
methodology best meets our legislative objectives.
We decided to keep ‘time and distance’ tariffs optional
Metering technology may no longer be a barrier to implementing ‘time and distance’ tariffs, and
they have certain benefits over ‘time or distance’ tariffs. However, in the context of the current
pandemic and possible resource constraints within the commercial passenger vehicle industry, it is
appropriate for the use of ‘time and distance’ tariffs to remain optional for now.
This decision takes effect in October
The release of this final decision and the accompanying price determination is the last step in our
review process.
The new price determination released with this decision will come into effect on 1 October 2020. It
replaces our last determination made on 13 September 2018.10
9Transport Alliance Australia, submission to consultation paper, 5 May 2020, p.3; Ola Australia, submission to
consultation paper, 7 May 2020, p.7; Anonymous, submission to consultation paper, 23 April 2020, p.1; 13cabs,
submission to consultation paper, 29 May 2020, p.3; Ola Australia, submission to consultation paper, 7 May 2020, p.6.
10Essential Services Commission, Determination of maximum fares for unbooked commercial passenger vehicles (from
1 October 2018), September 2018.
1. Our decision is to keep maximum fares unchanged
8
Essential Services Commission Unbooked taxi fare review 2020 – Final decision2. Consideration of industry developments
Developments in the commercial passenger vehicle industry suggest that the current maximum
fares are sufficient to maintain existing levels of service and supply.
This chapter discusses our findings on and consideration of these developments.
No shortage in the supply of unbooked taxis
We could normally seek information on the supply of and demand for taxis to assess if maximum
fares for unbooked taxi services need to change. Combining information on the trips made by taxis
and taxi shifts allows us to observe whether taxis are spending more time on the road without a
passenger. That is, if there is excess unused capacity.11
Generally, in a market where there is excess capacity we would expect either suppliers to exit, or
prices to go down. A decrease in prices would increase the number of customers that want the
services or products available. Suppliers would then use their unused capacity to service the new
customers and so increase their revenues without incurring additional fixed costs.
Unlike our 2018 taxi fare review, we did not collect detailed taxi trip and shift data. We did not want
to increase the regulatory burden on industry participants during the coronavirus pandemic and in
any event current activity levels would not be appropriate to guide the setting of prices for the next
two years.
However, information shared by some stakeholders on the demand and supply of unbooked taxis
and publicly available information on the number of registered commercial passenger vehicles
suggest there was more than enough supply to meet customer demand.
The number of registered rideshare vehicles doubled from 37,104 in June 2018 to 75,640 in
June 2020.12 The number of registered unbooked taxis (including wheelchair accessible taxis) in
Victoria increased by three per cent over the same period: 10,480 in June 2018 to 10,804 in June
2020.13 They peaked at 11,504 in October 2019.
The number of registered taxis that are able to offer unbooked fares has doubled since 2017
despite no change in maximum fares, suggesting that current fares are not leading to supply
shortages.
11Noting that there will be a significant share of a taxi shift where they will not have a passenger because drivers are
waiting for a passenger or are driving to collect a passenger.
12 Commercial Passenger Vehicles Victoria, email dated 20 August 2020.
13 Commercial Passenger Vehicles Victoria, email dated 20 August 2020.
2. Consideration of industry developments
9
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionA stakeholder submission on our consultation paper suggest that there was a moderate increase in
the demand for commercial passenger vehicles across the broader industry prior to the
coronavirus pandemic.14 But we do not have data on the change in demand for unbooked taxis
since the 2018 fare review. Some stakeholders also noted that despite the slight increase in
consumer demand for commercial passenger vehicles, increased competition from booked service
providers has resulted in reduced revenue for taxi operators and taxi drivers’ earnings.15
Changing maximum fares based on this evidence will not promote the efficient provision and use of
unbooked taxi services. Fare increases in this environment is likely to lead to a decline in demand
and an increase in unbooked taxis’ capacity.
Coronavirus pandemic and the industry’s financial viability
Many stakeholders reported that the coronavirus pandemic has significantly affected the
commercial passenger vehicle industry:
• Trips have declined by between 65 per cent to 95 per cent16
• Fares processed between late March and early April 2020 have decreased by more than 80 per
cent compared to the same period last year17
• Most non-driving staff have been stood down to reduce costs.18
We acknowledge that some form of restrictions in response to the coronavirus pandemic may
extend further to the next regulatory period (that is, from 1 October 2020 to 30 September 2022)
and potentially affect the viability of some operators providing unbooked taxi services.
Leaving the maximum fares unchanged is the most appropriate approach, given the uncertainty of
the next regulatory period. Increasing fares would not improve industry viability. It is likely to lead to
a further decline in demand for taxis. Decreasing fares to incorporate modest reductions suggested
by the current taxi cost index will potentially also have an adverse effect on the unbooked taxi
industry’s financial viability.
14 Transport Alliance Australia, submission to consultation paper, 5 May 2020, p.3.
15Victorian Taxi Association, submission to consultation paper, 8 May 2020, pp. 1 and 3; ESC meetings with various
stakeholders, April-May 2020; Transport Alliance Australia, submission to consultation paper, 5 May 2020.
16ESC meetings with various stakeholders, April-May 2020; Cabfare, submission to consultation paper, 6 April 2020,
p.1; Transport Alliance Australia, submission to consultation paper, 5 May 2020, p.2.
17 A2B, ASX public release, 30 April 2020, p.2.
18 A2B, ASX public release, 30 April 2020, p.2; ESC meetings with various stakeholders, April-May 2020.
2. Consideration of industry developments
10
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionGovernment funding boost
On 24 July 2020, the Victorian Government announced a $22 million industry support package to
provide financial assistance to the commercial passenger vehicle industry during the coronavirus
pandemic.19 The aim is ‘to boost the industry and support vulnerable Victorians who rely on the
service and drivers who have lost work with the reduction in trips’.20 This support package includes:
• $6 million to subsidise the depot fees paid by wheelchair accessible vehicle service providers
• $3.5 million to support increased cleaning and sanitation of vehicles
• $1.7 million to temporarily double the wheelchair lifting fee paid by government
• $1 million to help struggling booking service providers in the regional areas
• refund of the Commercial Passenger Vehicle Service Levy for the 2019-20 June quarter
• a temporary increase in the Multi Purpose Taxi Program (MPTP) subsidy from 50 per cent to
70 per cent of the fare.
This support package is in addition to the government’s pause on regulatory fees, the $1,500
Coronavirus Worker Support Payment and the federal government’s JobKeeper payment
program.21
This funding assistance is for a limited time and is aimed at helping the industry now. It does not
affect our decision on the maximum fares that would apply during the next regulatory period
starting 1 October 2020.
Service levels appear to have improved
Measuring taxi service quality can provide information on whether the level of fares or the structure
of fares is sufficient to maintain or improve the quality of service. We used two measures to
examine taxi service quality:
• a customer satisfaction index sourced from Commercial Passenger Vehicles Victoria
• the total number of complaints about taxis lodged with Commercial Passenger Vehicles Victoria.
Most recent information available from Commercial Passenger Vehicles Victoria on service levels
has not shown a decrease in the quality of taxi services in the metropolitan zone. This can be seen
19Department of Premier and Cabinet, Funding boost for taxis and commercial passenger vehicles, 24 July 2020,
accessed 7 August 2020, https://www.premier.vic.gov.au/funding-boost-taxis-and-commercial-passenger-vehicles.
20Department of Premier and Cabinet, Funding boost for taxis and commercial passenger vehicles, 24 July 2020,
accessed 7 August 2020, https://www.premier.vic.gov.au/funding-boost-taxis-and-commercial-passenger-vehicles.
21 Commercial Passenger Vehicle Victoria, Recurring fees paused until further notice, 15 April 2020, accessed 7 August
2020, https://cpv.vic.gov.au/about-us/news/taxis/recurring-fees-paused-until-further-notice; Department of Health and
Human Services, Coronavirus (COVID-19) Test isolation and worker support payment, accessed 7 August 2020,
https://www.dhhs.vic.gov.au/covid-19-worker-support-payment; Australian Taxation Office, JobKeeper key dates,
accessed 7 August 2020, https://www.ato.gov.au/General/JobKeeper-Payment/JobKeeper-key-dates/.
2. Consideration of industry developments
11
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionthrough improved customer satisfaction (Figure 2.1) and fewer complaints (Figure 2.2).22 Quality of
taxi services from 2014 to 2018 suggests that the current maximum fares provide sufficient
incentives to improve or maintain the quality of service provided.
13cabs also advised that service quality has improved as far as their affiliated taxis are
concerned.23 No consumer or industry stakeholders provided information to the review suggesting
that complaints or other indicators of service quality showed a decline.
In our 2018 fare review, we also used customer wait time (calculated from taxi networks’ trip data)
as one measure of taxi service quality. We were not able to calculate this measure for this review
given the unavailability of taxi trip data.
Figure 2.1: Customer satisfaction index – metro zone: 2013–2017 (taxis), 2018 (all
CPVs)24
70
60
Customer satisfaction index
50
40
30
20
10
0
2013 2014 2015 2016 2017 2018
22According to Commercial Passenger Vehicles Victoria, customer satisfaction is most influenced by driver behaviour,
safety and comfort, ease and reliability of booking and the price of trips. Source: Commercial Passenger Vehicles
Victoria, 2018-19 Annual Report, October 2019, p.22.
23 13cabs, comments made at the public forum, 27 July 2020.
24In 2018, Commercial Passenger Vehicles Victoria’s survey related to all commercial passenger vehicles rather than
only taxis.
2. Consideration of industry developments
12
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionFigure 2.2: Total number of complaints: 2013 to 2017 (taxis-metro zone), 2018 (all
CPVs-Victoria)25
3000
2500
No. of complaints
2000
1500
1000
500
0
2013 2014 2015 2016 2017 2018
Why we do not have service level measures for 2019 and 2020
We do not have customer satisfaction index data for 2019 and 2020. Commercial Passenger
Vehicles Victoria informed us that due to commercial passenger vehicle industry reforms, the
survey about customer satisfaction shown in Figure 2.1 was discontinued in 2019. It has been
replaced with a customer satisfaction survey that relates to the regulatory services provided by
Commercial Passenger Vehicles Victoria.26 This new survey is not relevant to our review.
We also do not have complaints data for 2019 and 2020. Customer complaints are now
increasingly being lodged with booking service providers and operators. Booking service providers
are required to have a complaints management system in accordance with the Commercial
Passenger Vehicle Industry Regulations 2018.27 The regulations also require providers of
unbooked commercial passenger vehicle services to ensure that every complaint relating to its
25 Starting from 2018, the number of complaints relates to all commercial passenger vehicles, rather than only taxis.
Starting mid-2018, complaints could be made directly to the relevant booking service provider or the provider of the
unbooked commercial passenger vehicle service. Under the Commercial Passenger Vehicle Industry Regulations 2018
(the regulations), the registration of a person as a booking service provider is subject to the condition that the person
must have a complaints management system. The regulations also contain a requirement for providers of unbooked
commercial passenger vehicle services to investigate complaints.
26 Commercial Passenger Vehicles Victoria, email dated 11 August 2020.
27Commercial Passenger Vehicle Industry Act 2017, s. 60(4); Commercial Passenger Vehicle Industry Regulations
2018, r. 23.
2. Consideration of industry developments
13
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionprovision of unbooked commercial passenger vehicle services is investigated promptly, and any
action required to adequately address the complaint is taken promptly.28
Incomplete service quality data was a concern raised by some stakeholders during our public
forum.29 We are aware of this development and this is also why we did not use Commercial
Passenger Vehicles Victoria’s complaints data for 2019. We will explore collecting relevant
complaints data directly from booking service providers and operators for our future fare reviews.
‘Time and distance’ tariffs to remain optional
A ‘time and distance’ tariff calculates fares using a time rate and a distance rate that apply at the
same time. Under the existing tariffs, which are ‘time or distance’ tariffs, either the time rate or the
distance rate applies at any point in time (depending on the speed of the vehicle).
We consider ‘time and distance tariffs’ have the benefits of:
• allowing passengers to better estimate the distance of their trip and trip duration, than trying to
estimate the speed they will be travelling at all times during the trip (as required under ‘time or
distance’ tariffs)
• being easier to compare fares between service offerings
• making fares more predictable.30
While metering technology may no longer be a barrier to implementing ‘time and distance’ tariffs,
in the context of the current coronavirus pandemic and possible resource constraints within the
unbooked taxi industry, it is appropriate for ‘time and distance’ tariffs to remain optional for now. 31
28 Commercial Passenger Vehicle Industry Regulations 2018, r. 24.
29Transport Alliance Australia, concerns raised at the ESC public forum, 27 July 2020; 13cabs, concerns raised at the
ESC public forum, 27 July 2020; Bendigo Taxis, concerns raised at the ESC public forum, 27 July 2020.
30Our 2018 final decision found that a greater number of trips tended to be within one, two, and three standard
deviations of the mean using ‘time and distance’ tariffs, which means that fares are likely to be less variable using ‘time
and distance’ tariffs. Source: Essential Services Commission, Unbooked commercial passenger fare review 2018 – Final
decision, September 2018, Appendix K.
31 A meter provider in its submission on our consultation paper reported that existing software does not support ‘time and
distance’ tariffs and resource constraints in the current economic climate limit the development of such software at this
time. For details see: Essential Services Commission, Unbooked taxi fare review 2020 – Draft decision, June 2020,
pp.12-13.
2. Consideration of industry developments
14
Essential Services Commission Unbooked taxi fare review 2020 – Final decision3. Costs of providing taxi services
In our 2016 and 2018 fare reviews, we used a taxi cost index to analyse changes in the costs of
providing taxi services and assess maximum fares.
For the 2020 fare review, we used the taxi cost index for an approximate indication of how the
costs of providing taxi services have changed. It is only one of a number of elements we
considered in reaching our final decision to keep maximum fares unchanged.
Overall, the taxi cost index showed costs have decreased slightly
We estimated that the overall cost of operating a taxi has declined by 2.7 per cent in nominal terms
from June 2018 to June 2020 for taxi operators, while the total cost (including an allowance for
potential driver earnings) has decreased by 0.4 per cent for the same period (Table 3.1). The
decrease was mostly driven by decreases in fuel costs, network equipment costs and registration
costs.
Table 3.1: Cost change for conventional taxis according to our current cost index –
June 2018 – June 2020
Cost components Cost share Change for cost Contribution to
component overall change in
index
Fuel 15.4% -16.6% -2.6%
Network (equipment) 2.9% -8.2% -0.2%
Network (labour) 2.9% 4.6% 0.1%
Comprehensive insurance 2.7% 7.4% 0.2%
Workers’ compensation 0.7% 4.6% 0.0%
Vehicle 5.2% 0.6% 0.0%
Registration/TAC 1.8% -65.6% -1.2%
Repairs and maintenance 8.0% 7.5% 0.6%
Administration 5.4% 4.4% 0.2%
Taxi operating costs 45.0% NA -2.7%
Driver labour 55.0% 4.3% 2.3%
Total* 100.0% NA -0.4%
*Note: Due to rounding, the totals may not equal the sum of the columns.
3. Costs of providing taxi services
15
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionWe also note that the index includes a measure to account for changes in the cost of driver labour.
Our index for wheelchair accessible taxis suggests costs have decreased by 0.3 per cent from
June 2018 to June 2020. The decrease in costs has been largely driven by the same factors
mentioned above.
See Appendix D for more details on the taxi cost index.
We used the taxi cost index to approximate the change in unbooked taxi
costs
As we discussed in our draft decision, some stakeholders brought to our attention that our taxi cost
index is no longer fully reflective of taxi operators’ costs (the index was constructed in 2013).
For example, a stakeholder mentioned that in urban and large regional zones in Victoria, the majority
of taxis are hybrid vehicles.32 This may have changed taxi operators’ costs, but we do not know by
how much. We also assume that choosing to use another technology means it is likely to have some
cost advantages, implying the current cost index may overstate cost increases.
We placed less weight on the cost index compared with the 2018 review. Our cost index is only
one of a number of considerations we have balanced in reaching our final decision to keep
maximum fares unchanged.
While driver labour is a cost input, we do not set driver earnings
The Australian Taxi Drivers Association noted that cost inputs related to driver labour do not reflect
or account for the reality of an average bailee taxi driver. They suggested we recommend the fare
split between drivers and operators be revised to 65:35 ratio, respectively.33
We do not set drivers’ earnings. How much taxi drivers earn is a function of:
• the demand for commercial passenger vehicle services
• the supply of commercial passenger vehicle services
• fares charged
• how revenue is shared between taxi drivers and operators (currently a minimum of 55:45
ratio34).
32 ESC meetings with various stakeholders, April-May 2020.
33 Australian Taxi Drivers Association, submission to draft decision paper, 28 July 2020.
34The 55 per cent minimum is an implied condition of every driver agreement as per s.97 of the Commercial Passenger
Vehicle Industry Act 2017.
3. Costs of providing taxi services
16
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionThis minimum driver:operator revenue share ratio is determined under the Commercial Passenger
Vehicle Industry Act 2017 and is a matter for Commercial Passenger Vehicles Victoria’s
consideration. We do not have scope to change it in our review.
Costs associated with regulatory changes are unlikely to be material
If regulatory changes have increased costs, we would need to assess who bears those costs (taxi
drivers, operators or booking service providers) and how they affect the total cost of providing an
unbooked taxi service.
We found that the costs of compliance with regulatory changes and safety obligations are unlikely
to be material. We also sought stakeholder views on the costs associated with these regulatory
changes. We did not receive any stakeholder feedback on the impact of regulatory changes on
costs.
Multi Purpose Taxi Program
The Multi Purpose Taxi Program assists with the travel needs of people with severe and
permanent disabilities by offering subsidised taxi fares to members. Two key changes likely to
impact the program in the future are:
• Commercial Passenger Vehicles Victoria introducing more transport options for Multi-Purpose
Taxi Program passengers (including rideshare).35
• The National Disability Insurance Scheme (NDIS) changing the way some program users’ trips
are funded.36 We note that not all program members will be moving to NDIS.
We did not adjust the maximum fares for the above changes. There will be no additional costs
associated with providing unbooked taxi services to members under the Multi Purpose Taxi
Program given there are no changes to the requirements in providing services to program
members.
There will also be no additional administrative costs related to providing unbooked taxi services to
program members who have become NDIS participants. Taxi service providers will get paid the full
35Commercial Passenger Vehicles Victoria, MPTP Expansion Program trial with Uber in Greater Geelong, 5 March
2020, accessed 20 March 2020, https://cpv.vic.gov.au/about-us/news/taxis/mptp-expansion-program-trial-with-uber-
underway-in-greater-geelong.
36 National Disability Insurance Scheme, Transport funding, accessed 20 March 2020,
https://www.ndis.gov.au/participants/creating-your-plan/plan-budget-and-rules/transport-funding.
3. Costs of providing taxi services
17
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionamount of the fare at the end of the trip just as they would for processing fares for other taxi
passengers.37
We did not receive any feedback from stakeholders about the impact of providing unbooked taxi
services to members under the Multi Purpose Taxi Program or NDIS on the costs of providing an
unbooked taxi service.
Commercial passenger vehicle service levy
The commercial passenger vehicle service levy applies in respect to each commercial passenger
vehicle service transaction carried out during a return period.38 The party liable for paying the levy
depends on:
• how the service is provided (booked or unbooked)
• whether the service is facilitated by an affiliated service.39
The responsible party must lodge a quarterly return and pay the levy to the State Revenue Office
for Victoria.
Our current price determination for maximum fares includes the commercial passenger vehicle levy
recovery component.40 Service providers have the option of absorbing the cost of the levy or
passing it on to passengers by increasing their fares.
In terms of the costs of administering the commercial passenger vehicle levy, for taxi service
operators not affiliated with booking service providers, the cost of lodging a quarterly return online
and paying the levy is unlikely to be material.41 Most operators are affiliated with a network. We
understand that Silver Top Taxis (for both booked and unbooked services) and 13cabs (for booked
services) lodge a quarterly return and pays the levy on behalf of their affiliated operators.
37 That is because NDIS participants who cannot take public transport due to their disability receive a fortnightly
allowance which they can use to pay for taxis, rideshare services, community transport, and other transport methods.
Source: National Disability Insurance Scheme, Transport funding, accessed 20 March 2020,
https://www.ndis.gov.au/participants/creating-your-plan/plan-budget-and-rules/transport-funding.
38Section 235 of the Commercial Passenger Vehicle Industry Act 2017 states 'this Part imposes a levy in respect of each
commercial passenger vehicle service transaction carried out during a return period.' 'Commercial passenger vehicle
service transaction' is defined in section 3 as ‘the provision for a single fare of (a) a booked commercial passenger
vehicle service; or (b) an unbooked commercial passenger vehicle service'.
39 Commercial Passenger Vehicle Industry Act 2017, s. 236.
40Essential Services Commission, Determination of maximum fares for unbooked commercial passenger vehicles (from
1 October 2018), September 2018, pp.1, 7 and 12.
41Independent operators are taxi service providers who are not affiliated with any booking service providers. To
complete a quarterly return, they only need to provide the total number of trips they are liable to pay the levy for and their
bank account details. Source: State Revenue Office for Victoria, Lodge a return and make a payment, accessed on 12
June 2020, https://www.sro.vic.gov.au/commercial-passenger-vehicle-service-levy/lodge-return-and-make-payment.
3. Costs of providing taxi services
18
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionTherefore, these operators do not incur any additional costs in administering the commercial
passenger vehicle service levy.
We did not receive any feedback from stakeholders about the impact of administering the
commercial passenger vehicle service levy on the cost of providing an unbooked taxi service.
Safety obligations
The regulatory framework in the Commercial Passenger Vehicle Industry Act 2017 (CPVI Act) and
the Commercial Passenger Vehicle Industry Regulations 2018 establish safety standards and
safety duties for each industry participant to ensure the safety of their commercial passenger
vehicle service.42 The safety principles and duties include requirements for:
• industry participants43 to notify Commercial Passenger Vehicles Victoria of any notifiable
incident44 that occurs in relation to the use of a commercial passenger vehicle to provide a
commercial passenger vehicle service.45
To report any notifiable incidents to Commercial Passenger Vehicles Victoria, the industry
participant will only have to fill in an online form providing some details about the incident.46
Based on the amount of details they need to provide, we do not consider that the cost of
reporting a notifiable incident is likely to be material for taxi operators.
• registered booking service providers to establish and maintain a register of safety risks.47
As this is the responsibility of the booking service provider, taxi operators do not incur any
additional costs related to maintaining a register of safety risks.
We also note that stakeholders provided us with no additional information on the impact of the
safety obligations on the cost of providing an unbooked taxi service. For the reasons outlined
above, we have not made any changes to maximum fares to reflect regulatory changes.
42Commercial Passenger Vehicle Industry Act 2017, Part 2; Commercial Passenger Vehicle Industry Regulations 2018,
Part 2.
43Industry participants include booking service providers, owners of motor vehicles used to provide commercial
passenger vehicle services, drivers providing commercial passenger vehicle services, persons who have control over the
provision of commercial passenger vehicle services and suppliers of services or equipment used in the provision of
commercial passenger vehicle services. See Commercial Passenger Vehicle Industry Act 2017, ss. 23-27.
44Includes: (a) an incident resulting in the death of or serious injury to any person; (b) an incident resulting in attendance
by a police officer or health professional. See Commercial Passenger Vehicle Industry Regulations 2018, r. 7(1)(a)-(b).
45 Commercial Passenger Vehicle Industry Act 2017, s. 272; Commercial Passenger Vehicle Industry Regulations 2018,
r. 7.
46 Commercial Passenger Vehicles Victoria, Notifiable Incidents, accessed on 1 June 2020,
https://cpv.vic.gov.au/drivers/accredited-driver-responsibilities/notifiable-incidents.
47 Commercial Passenger Vehicle Industry Regulations 2018, r. 5.
3. Costs of providing taxi services
19
Essential Services Commission Unbooked taxi fare review 2020 – Final decision4. Stakeholders’ feedback on our draft decision
In total, we received eight written submissions on our draft decision paper. Submissions were from
peak bodies, a booking service provider and individuals.
We held a virtual public forum on 27 July 2020 to explain our role in setting maximum fares for
unbooked taxi services, discuss our draft decision and seek stakeholders’ feedback.
This chapter summarises the key issues raised by stakeholders and how we have considered them
in our final decision. Appendix E provides a list of the stakeholders that provided written
submissions.
Some stakeholders supported keeping maximum fares unchanged
Out of the eight written submissions we received, three supported our decision to keep maximum
fares unchanged. Blind Citizens Australia, a national association representing people who are blind
and vision impaired noted that it ‘welcomes the decision not to raise prices for unbooked taxi fares,
particularly given the COVID-19 restrictions and the complications they have caused for so many,
from an economic perspective…The draft decision remains beneficial and considers the financial
barriers, which many people who are blind or vision impaired face, in these uncertain times.’48
The Australian Taxi Drivers Association has some concerns about the 55:45 income sharing
arrangement between drivers and operators but also agreed with our draft decision 'at this time’.49
An individual also suggested we leave the maximum fares ‘as they are’.50
‘Maximum fares should increase’
13cabs stated that the commission’s decision to not increase fares since 2014 has caused the
‘stagnation of driver earnings’, directly affected the size of the driver pool and threatened the
viability of the taxi industry.51
We do not consider there to be a basis for increasing maximum fares based on this submission.
Firstly, there was no basis to increase the maximum fares during our 2016 and 2018 fare reviews.
We noted that market outcomes – in particular, lower operating costs, declining demand for taxis
and greater competition – suggested there is or would be increasing pressure on taxi service
48 Blind Citizens Australia, submission to draft decision paper, 20 July 2020.
49 Australian Taxi Drivers Association, submission to draft decision paper, 28 July 2020.
50 Anonymous, submission to draft decision paper, 28 July 2020.
51 13cabs, submission to draft decision paper, 7 August 2020, p.2.
4. Stakeholders’ feedback on our draft decision
20
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionproviders to compete through lower fares, improved service offerings, or a combination of both. For
details, refer to our 2016 and 2018 final decision papers.52
Secondly, taxi operators’ costs have decreased since 2016. Operators could have increased
drivers’ revenue share above the minimum 55 per cent if they wished to. In addition, fares for
booked taxi services remain the same as those for unbooked taxi services. Operators can set their
own fares for booked services and might be expected to do so if they needed to offer more money
to their drivers.
Thirdly, our objectives in regulating the maximum fares for unbooked taxi services are to promote
the long term interests of Victorian consumers and to promote the efficient provision and use of
unbooked taxi services. Increasing maximum fares to offset losses in revenue or driver income
resulting from oversupply and increased competition in the industry would not be consistent with
those objectives. Customers would pay more, and unbooked taxis might be used even less.
Furthermore, to the extent that the industry is facing difficulties now as a result of the coronavirus
pandemic, it is not because of fares. We acknowledge that the total average cost of operating
unbooked taxis may have increased for some operators due to the significant decline in demand
during the pandemic. Our task is to set maximum fares that are based on the long-run cost of a
financially viable industry, not short-term costs.
Increasing maximum fares is not the solution to improve the industry's financial viability at this time,
and it would not be in the long term interests of Victorian consumers and the industry.
Appendix C sets out our approach to assessing maximum fares including how our approach best
meets our legislative objectives and requirements.
‘Driver earnings should enable them to pay their bills during stage 4
lockdown’
13cabs raised that during the stage 4 lockdown, ‘it is even more essential that the earnings
potential for taxi drivers is set at a level that enables them to pay their bills and survive in these
extraordinary times.’53 As we discussed in our draft decision, we do not set drivers’ earnings. We
would also assume that under the stage 4 restrictions, unbooked taxi drivers’ decision on whether
to provide a service would be influenced by:
• their operating costs
• the likely number of customers
52Essential Services Commission, Taxi Fare Review: Final report, June 2016, p.7; Essential Services Commission,
Unbooked Commercial Passenger Vehicle Fare Review 2018: Final decision, September 2018, p.2.
53 13cabs, submission to draft decision paper, 7 August 2020, pp.1-2.
4. Stakeholders’ feedback on our draft decision
21
Essential Services Commission Unbooked taxi fare review 2020 – Final decision• the risks to their and their family’s health
• the benefits they can receive from the state and federal governments, such as the funding boost
and any JobKeeper payments.
Increasing fares could further reduce demand for unbooked taxi services while decreasing fares
could further discourage unbooked taxi service providers from operating during the stage 4
restriction period.
‘Commission treats the taxi industry differently’
13cabs in its submission to our draft decision paper questioned why the commission uses a
different method to regulate the taxi industry. It stated that:
For the overwhelmingly majority of commercial services that the ESC regulates (including
ports, rail, telecommunications, and water rights) the regulated prices of these essential
services are subject to annual pricing escalators … usually based on movements in the CPI.
This is in stark contrast to the way in which the ESC regulates Taxi fares where the ESC has
determined no increases in taxi fares nor the incorporation of any annual price escalators
where necessary for the last six years.
The manner in which the ESC approached its responsibilities in respect of the Taxi industry
has constrained the viability of an essential service within a rapidly changing regulatory,
commercial and competitive context and therefore has acted contrary to its mandate to act in
the long-term interests of Victorians’.
13cabs reiterated that maximum fares should increase and that failing to do so would push driver
earnings further down and limit the industry’s ability to attract and retain quality drivers.54
It is important to remember that we regulate fares and other essential services in accordance with
the specific requirements of the relevant legislation. We do not adjust prices for our other regulated
services annually based on the movements in the CPI. For example, changes in the annual water
prices are based on water businesses’ required revenue to recover their annual efficient costs over
the five-year regulatory period. A similar cost of service approach is used to set the annual
Victorian Default Offer. Under the cost of service approach, prices could increase or decrease
each year. This approach is consistent with the requirements of the legislation relevant to those
essential services.
Our approach is suited to the particular circumstances of the commercial passenger vehicle
industry and unbooked taxi services. Unlike monopoly water businesses, unbooked taxis service
54 13cabs, submission to draft decision paper, 7 August 2020, pp.2-3.
4. Stakeholders’ feedback on our draft decision
22
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionproviders operate in a competitive environment. Given this, a market outcomes approach which we
have adopted in the last two fare reviews is appropriate in setting maximum fares. As discussed
above, there was no basis to increase the maximum fares in 2016 and 2018.
We have also consulted stakeholders on a variety of approaches to setting fares as part of this
review. For details, see Appendix F of this paper, our Unbooked taxi fare review 2020 –
Consultation paper and Unbooked taxi fare review 2020 – draft decision paper.55
Matters raised during the public forum
Stakeholders shared the following concerns with us during the public forum:
• Revenue declined prior to the coronavirus pandemic and more so during the pandemic.56 We
have addressed this concern in Chapters 1, 2 and partly above.
• There are no separate cost and demand assessments for the Large Regional zone.57 Based on
the information we received during our taxi cost survey in 2014, there was no material
difference in taxi operating costs between the Metropolitan Melbourne and Urban and Large
Regional zones. We accept the need for ongoing assessment of dynamic market conditions
and costs across different zones in our reviews. However, as mentioned earlier, we have not
collected data for such an assessment for this review to avoid imposing administrative burden
on the industry during the coronavirus pandemic.
• Service quality data used in our assessment may not be complete.58 We are aware of this
service quality data constraint and this is also why we did not use Commercial Passenger
Vehicles Victoria’s complaints data for 2019. We will explore collecting relevant complaints
data directly from booking service providers and operators for our future fare reviews.
• The driver labour component used in our taxi cost index does not ‘reflect or account for the
reality of an average bailee taxi driver’; the commission should recommend that the driver
agreement be revised to a maximum fare split of 65:35 per cent between the driver and
operator, respectively.59 This ratio is determined under the Commercial Passenger Vehicle
Industry Act 2017 and is a matter of consideration for Commercial Passenger Vehicles Victoria.
This is outside the scope of our review.
55Essential Services Commission – Consultation paper, April 2020; Essential Services Commission – Draft decision,
June 2020.
56 Bendigo Taxis, concerns raised at the ESC public forum, 27 July 2020; 13cabs, concerns raised at the ESC public
forum, 27 July 2020.
57 Bendigo Taxis, concerns raised at the ESC public forum, 27 July 2020.
58Transport Alliance Australia, concerns raised at the ESC public forum, 27 July 2020; 13cabs, concerns raised at the
ESC public forum, 27 July 2020; Bendigo Taxis, concerns raised at the ESC public forum, 27 July 2020.
59 Australian Taxi Drivers Association, submission to draft decision paper, 28 July 2020.
4. Stakeholders’ feedback on our draft decision
23
Essential Services Commission Unbooked taxi fare review 2020 – Final decision• Some stakeholders also asked why we are regulating unbooked taxi services only and not
regulating rideshare services.60 The Parliament has established our role and this is beyond the
scope of our review. It is a matter for the Department of Transport to consider. Our role under
the Essential Services Commission Act 2001 and Commercial Passenger Vehicle Industry Act
2017 is to regulate maximum fares for unbooked taxi services supplied by or within the
commercial passenger vehicle industry.
60 Raj, submission to draft decision paper, 14 July 2020; Transport Alliance Australia, concerns raised at the ESC public
forum, 27 July 2020; Victorian Drivers Alliance, concerns raised at the ESC public forum, 27 July 2020.
4. Stakeholders’ feedback on our draft decision
24
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionAppendix A: Maximum fares
Metropolitan zone and East Urban area
Table A.1: Maximum fares for unbooked commercial passenger vehicle services that
begin in the Melbourne Metropolitan zone or east urban area - ‘time or distance’
tariffs: unchanged
Tariff 1 Tariff 2 Tariff 3
‘Day’ ‘Overnight’ ‘Peak’
(9am-5pm) (5pm-9am, (Fri & Sat nights
excluding peak) 10pm-4am)
Standard fare components Maximum charge up to
Flagfall ($) 4.20 5.20 6.20
Distance rate ($/km) 1.622 1.804 1.986
(when speed is above 21 km/hr)
Detention rate ($/min) 0.568 0.631 0.695
(when speed is below 21 km/hr)
Maximum
Other fare components (applicable to tariffs 1, 2 and 3)
charge up to
High occupancy fee (a) $14.00
Airport taxi rank fee (b) For trips from the airport rank Pass-through
Holiday rate (c) Tariff 3 rates
CPV levy recovery fee Pass-through
CityLink and EastLink tolls (d) Pass-through
Cleaning fee Up to a maximum of $120
(a) For commercial passenger vehicles carrying 5 or more passengers.
(b) As published by that airport in a daily newspaper generally circulating in Victoria and on that airport’s website.
(c) For trips commencing on Christmas Day, Boxing Day, New Year’s Day and from 6pm on New Year’s Eve.
(d) As published from time to time in the Victorian Government Gazette in accordance with the Melbourne City Link Act
1995 or the EastLink Project Act 2004 as applicable.
Appendix A: Maximum fares
25
Essential Services Commission Unbooked taxi fare review 2020 – Final decisionTable A.2: Maximum fares for unbooked commercial passenger vehicle services that
begin in the Melbourne Metropolitan zone or east urban area - ‘time and distance’
tariffs: unchanged
Tariff 1 Tariff 2 Tariff 3
‘Day’ ‘Overnight’ ‘Peak’
(9am-5pm) (5pm-9am, (Fri & Sat nights
excluding peak) 10pm-4am)
Standard fare components Maximum charge up to
Flagfall ($) 4.20 5.20 6.20
Distance rate ($/km) (at all times) 1.342 1.490 1.648
Duration rate ($/min) (at all times) 0.344 0.379 0.408
Maximum
Other fare components (applicable to tariffs 1, 2 and 3)
charge up to
High occupancy fee (a) $14.00
Airport taxi rank fee (b) For trips from the airport rank Pass-through
Holiday rate (c) Tariff 3 rates
CPV levy recovery fee Pass-through
CityLink and EastLink tolls (d) Pass-through
Cleaning fee Up to a maximum of $120
(a) For commercial passenger vehicles carrying 5 or more passengers.
(b) As published by that airport in a daily newspaper generally circulating in Victoria and on that airport’s website.
(c) For trips commencing on Christmas Day, Boxing Day, New Year’s Day and from 6pm on New Year’s Eve.
(d) As published from time to time in the Victorian Government Gazette in accordance with the Melbourne City Link Act
1995 or the EastLink Project Act 2004 as applicable.
Appendix A: Maximum fares
26
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